Alternative maximum tax for low-income individuals

(a) In general Part I of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 1 the following new section: 1A. Alternative maximum tax for low- and middle-income individuals (a) In general In the case of a qualified individual, the tax imposed under section 1 for any taxable year shall not exceed 25.5 percent of the excess of— (1) the taxpayer’s modified adjusted gross income for such taxable year, over (2) the cost-of-living exemption for such taxable year. (b) Qualified individual (1) In general For purposes of this section, the term qualified individual means, with respect to any taxable year, any individual if the taxpayer's modified adjusted gross income for such taxable year is less than 175 percent of the cost-of-living exemption for such taxable year. (2) Exception The term qualified individual shall not include any person described in section 63(c)(6). (c) Cost-of-Living exemption For purposes of this section— (1) In general The term cost-of-living exemption means, with respect to any taxable year— (A) in the case of a taxpayer not described in subparagraph (B) or (C), 100 percent of the annualized cost-of-living wage, (B) in the case of a joint return, 200 percent of the annualized cost-of-living wage, and (C) in the case of a head of household, 140 percent of the annualized cost-of-living wage. (2) Annualized cost of living wage (A) In general The term annualized cost-of-living wage means, with respect to any taxable year, an amount equal to $46,000, multiplied by the ratio of— (i) the CPI–U for the calendar year preceding the calendar year in which such taxable year begins, to (ii) the CPI–U for the calendar year preceding the calendar year of the date of enactment of the Working Americans’ Tax Cut Act. (B) CPI–U For purposes of this paragraph, the term CPI–U means, when used with respect to a calendar year, the Consumer Price Index for all urban consumers, as published by the Bureau of Labor Statistics, for September of such year. (d) Modified adjusted gross income For purposes of this section, the term modified adjusted gross income means adjusted gross income increased by— (1) any amount excluded from gross income under section 911, 931, or 933, and (2) an amount equal to the portion of the taxpayer's social security benefits (as defined in section 86(d)) which is not included in gross income under section 86 for the taxable year.. (b) Clerical amendment The table of sections for part I of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 1 the following new item: Sec. 1A. Alternative maximum tax for low- and middle-income individuals.. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.